FINRA files complaint against former Spartan Capital Securities broker James Robert Pecoraro alleging customer account churning and unsuitable trading recommendations

If you invested with a broker who frequently bought and sold securities in your account without your explicit authorization, what one investor has alleged about James Robert Pecoraro may be worth knowing. BrokerCheck records show that Pecoraro (CRD# 2440231), formerly registered with Spartan Capital Securities, LLC, is named as a respondent in a FINRA complaint filed on December 15, 2025, alleging multiple violations including churning, unsuitable trading recommendations, and failure to comply with Regulation Best Interest.

Important notice: FINRA issued the following complaint. Issuance of a disciplinary complaint represents FINRA’s initiation of a formal proceeding, not a decision as to any of the allegations contained in the complaint.

The complaint alleges that between approximately 2012 and 2018, Pecoraro and co-respondent John Joseph Stapleton engaged in a pattern of excessive trading activity in customer accounts, generating millions of dollars in revenue for Spartan Capital Securities while causing customers millions in losses.

Allegations of Churning and Unsuitable Trading

The complaint in FINRA Case #2018056490335 alleges the following violations: Pecoraro and Stapleton willfully violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 by engaging in a pattern of churning, exercising de facto control over trading decisions, determining what securities to buy and sell, the quantity of securities, the timing of transactions, and the frequency of trades. The complaint further alleges that customers relied on their recommendations and routinely followed their trading directives.

According to the complaint, Pecoraro’s conduct was animated by an intent to defraud or by reckless disregard for the interests of customers. The complaint alleges that Pecoraro recommended trading activity that was quantitatively excessive and unsuitable, with particularly high cost-to-equity ratios, excessive turnover rates, and elevated transaction costs relative to customers’ account sizes and investment objectives.

The complaint further alleges that Pecoraro violated Regulation Best Interest by failing to act in customers’ best interests when recommending securities transactions and by failing to exercise reasonable diligence, care, and skill to ensure that recommendations were not excessive and were suitable for each customer.

It is important to note that, as of the time of this report, the complaint is still pending. No findings of wrongdoing have been made.

Understanding Churning and Unsuitable Trading

Churning occurs when a broker exercises control over a customer’s account and executes a series of transactions that are excessive in light of the customer’s objectives and financial situation. The goal of churning is typically to generate commissions for the broker and the firm, rather than to achieve the customer’s investment goals. Unlike a customer who directs their own trades, a churning victim does not control the trading decisions; the broker and firm do.

Unsuitable recommendations are trades that do not align with a customer’s financial situation, investment objectives, or risk tolerance. When a broker recommends excessive trading, those recommendations are by definition unsuitable. The SEC and FINRA have made clear that brokers have a duty, whether under the suitability rule (FINRA Rule 2111) or Regulation Best Interest, to recommend only transactions that are appropriate given the customer’s circumstances.

The harm from churning compounds over time. Each trade generates a commission paid by the customer (through the bid-ask spread or explicit commissions). With high-frequency trading, transaction costs accumulate, and the account balance erodes. Customers who rely on their broker’s expertise have no way of knowing that the trading is excessive; that is precisely why the law places a duty on the broker to police itself.

Applicable Legal Framework

The complaint alleges violations of multiple rules and statutes:

SEC Rule 10b-5: The Securities Exchange Act’s anti-fraud rule, which prohibits any manipulative or deceptive device in connection with the purchase or sale of a security. The willful churning of a customer account can violate Rule 10b-5 if the broker acts with scienter (intent to defraud or reckless disregard).

FINRA Rule 2111 (Suitability): For recommendations made before June 30, 2020, brokers must ensure that recommended transactions are suitable for the customer based on the customer’s financial situation, investment objectives, and risk tolerance. The pre-Reg BI suitability rule was the controlling standard for the period covered by the complaint.

Regulation Best Interest: For recommendations made on or after June 30, 2020, SEC Regulation Best Interest (17 C.F.R. § 240.15l-1) requires brokers to act in the customer’s best interest and prioritize the customer’s interests over their own commissions. Reg BI prohibits conflicts of interest unless the firm has a policy and disclosure system designed to manage conflicts.

FINRA Rule 3110 (Supervision): Member firms must establish and maintain a supervisory system that, among other things, reasonably detects and prevents violations of the federal securities laws and FINRA rules. The complaint alleges that Spartan Capital Securities failed to implement sufficient supervisory controls to detect the excessive trading pattern.

What This Means for Investors

If the allegations are established, customers who suffered losses as a result of Pecoraro’s trading recommendations may have options for recovery. Investors who believe they were victims of churning or unsuitable trading typically pursue claims through FINRA arbitration, where they can seek damages equal to their out-of-pocket losses (the amount they lost relative to what they would have had if the recommendations were not made) or a benefit-of-the-bargain measure (the difference between what they paid and what the investments were worth).

Proving churning requires evidence of: (1) excessive trading by the broker; (2) control by the broker over the account; (3) intent to defraud or scienter; and (4) losses to the customer. The complaint’s detailed allegations about the frequency, timing, and nature of the trading conducted by Pecoraro and Stapleton provide the foundation for potential customer claims.

Steps to take right now

1. Gather all documents related to accounts you maintained with Pecoraro at Spartan Capital Securities, including account statements, confirmations, prospectuses, and any correspondence.
2. Write down what you remember being told about the trading strategy, including what Pecoraro said the account would do, what returns or income he promised, and any specific investment objectives you communicated.
3. Look up Pecoraro on BrokerCheck at brokercheck.finra.org (CRD# 2440231) to view his full registration and disciplinary history.
4. Calculate your losses specifically by comparing your account balance to what it would have been if a more conservative strategy had been pursued, or if you had invested passively in a benchmark index.
5. Contact a securities arbitration attorney to discuss your account and whether you may have a claim. Many attorneys offer free and confidential consultations.

Rosenberger + Kawabata represents retail investors in FINRA arbitration proceedings involving broker misconduct, including churning, unsuitable trading, and unauthorized trading. If you invested with James Robert Pecoraro and experienced unexpected losses or were told your account was being actively traded to maximize returns, contact Rosenberger + Kawabata for a free and confidential consultation.

The information in this post comes from FINRA’s public BrokerCheck database and FINRA’s disciplinary complaint filing. You can view James Robert Pecoraro’s BrokerCheck record (CRD# 2440231) here.

You can view the full February 2026 FINRA disciplinary actions report here.